The Trend is Your Friend

The world of business is fraught with potential disaster lurking around every corner. Businessmen are often known to treat investments in the foreign exchange market or the stock market like bets, high risk endeavours that could engender either mind boggling profits or crippling loss. However, these types of businessmen aren’t usually around for very long. If they are smart, they earn some money based on pure luck and retire, but the less smart variety tend to keep pushing their luck until, eventually, they find that their luck has run out and they are left with nothing.

Hence, smart businessmen tend not to bet. Instead, they tend to make investments based on analysis. There are basically two main types of analysis, one is called technical analysis and the other is called fundamental analysis. Both these types of analysis have one thing in common: they analyze trends in order to ascertain which investments would be sound and earn them money and which investments could potentially fail and end up making them lose money.

The analysis of trends is, therefore, essential for the savvy businessperson, trader or investor. If one were to apply technical analysis techniques, the trends one would analyse would be those observed in the past. These trends were those trends that set precedents, that allowed investors to learn about how the market in question worked, and the analysis of these trends allows investors to compare with trends occurring in today’s market.

If a trend has been seen before, investors can analyse that outcome of these trends and base their own investments, trading and dealings based on the assumption that, if the trend lead to a certain outcome before, it would be reasonable to expect that it would lead to the same outcome again, lending a certain predictability to market trends.

Fundamental analysis techniques, on the other hand, tend to analyze the commodities being traded themselves, along with the other traders that are investing in assets contained within the market. The trends analyzed using this technique tend to be present trends. Investors and traders look at the financial position of companies within the market, or countries if the market in question is the foreign exchange market, and make purchases and trades based on this. For example, if a particular currency or stock is seeing an upward trend, which essentially means that it is appreciating in value, the trader or investor would ascertain this upward trend using fundamental analysis techniques and make an investment or trade based on this trend. If the trend is determined to be upward, investors and traders would purchase the stock or currency and sell it when the upward trend allows them to make a decent profit from the sale.

All in all, if you are an investor, a businessman, a trader, or just someone who wants to be any of the three aforementioned, always remember that the trend is your friend. Analysis of trends is what changes gambling into investing.